Cybex International Inc. (CYBI) filed Quarterly Report for the period ended 2009-06-27.
CYBEX INTERNATIONAL INC. designs develops manufactures and sells/distributes testing and rehabilitation strength training and cardiovascular equipment used in rehabilitation sports medicine and fitness conditioning. These products are marketed under a number of trademarks leading with the name ``Cybex``. They operate in one industry segment the exercise equipment industry which includes institutional fitness facilities sports teams research/educational centers hospitals private practice physical therapy clinics and rehabilitation centers. Cybex international inc. has a market cap of $18.46 million; its shares were traded at around $1.08 with and P/S ratio of 0.12.
Highlight of Business Operations:
Our net sales decreased $5,381,000, or 16%, to $27,755,000 for the second quarter of 2009 from $33,136,000 for the second quarter of 2008. For the six months ended June 27, 2009, net sales decreased $16,239,000, or 22%, to $56,677,000 from $72,916,000 compared to the same period in 2008. For the second quarter of 2009, sales of cardiovascular products decreased $1,194,000, or 7%, to $15,837,000 and sales of strength products decreased $3,513,000, or 27%, to $9,298,000 along with decreased freight, parts and other sales of $674,000 or 21%, to $2,620,000 compared to the same period in 2008. For the six months ended June 27, 2009, sales of cardiovascular products decreased $6,141,000, or 17%, to $31,068,000 and sales of strength products decreased $9,304,000, or 32%, to $19,560,000 along with decreased freight, parts and other sales of $794,000 or 12%, to $6,049,000 compared to the same period in 2008. The sales decline was generally throughout our product offerings and was reflective of economic conditions, generally and in the fitness industry.
Selling, general and administrative expenses decreased $1,043,000, or 10%, to $9,072,000 in the second quarter of 2009 compared to $10,115,000 in the second quarter of 2008, predominantly due to a decrease in domestic and international selling and marketing expenses ($694,000) and a decrease in product development costs ($667,000). For the six months ended June 27, 2009, selling, general and administrative expenses decreased by $2,705,000, or 13%, to $18,935,000 compared to $21,640,000 for the comparable period in 2008, predominantly due to a decrease in product development costs ($1,443,000) and a decrease in domestic and international selling and marketing expenses ($1,235,000). In response to economic conditions we have effectuated various cost reductions. We expect that these steps will result in selling, general and administrative expenses continuing at a reduced level for the balance of 2009. Selling, general and administrative expenses represented 33% of sales for the three and six months ended June 27, 2009 and 31% and 30% of sales for the three and six months ended June 28, 2008, respectively.
As of December 31, 2008, U.S. federal operating loss carryforwards of approximately $16,009,000 were available to us to offset future taxable income and, as of such date, we also had foreign net operating loss carryforwards of $4,426,000, federal alternative minimum tax credit carryforwards of $670,000 and federal research and development tax credit carryforwards of $251,000. The net deferred tax asset balance of $14,156,000 at June 27, 2009 represents the amount that we believe is more-likely-than-not to be realized, and the remaining valuation allowance at June 27, 2009 is $1,680,000. If the estimates and related assumptions relating to the likely utilization of the deferred tax asset change in the future, the valuation allowance may change accordingly.
Cash used in investing activities of $139,000 during the six months ended June 27, 2009 consisted of purchases of manufacturing tooling and equipment of $70,000, primarily for the manufacture of new products and purchases of computer hardware and infrastructure of $69,000. Cash used in investing activities during the six months ended June 28, 2008 consisted of purchases of manufacturing tooling and equipment of $1,293,000, primarily for the manufacture of new products, and computer hardware and infrastructure of $858,000. Capital expenditures for the balance of 2009 are being evaluated and will depend on the sales and profitability levels of the business.
Cash used in financing activities was $398,000 for the six months ended June 27, 2009, consisting primarily of $925,000 of term loan repayments and $451,000 for purchases of treasury stock through a repurchase program offset by a $1,000,000 Wachovia term loan. Cash used in financing activities was $3,603,000 for the six months ended June 28, 2008, consisting primarily of debt repayments.
Valuation of deferred tax assets. In 2002, the Company established a full valuation allowance against its net deferred tax assets. On a quarterly basis, management reevaluates the need for this valuation allowance in accordance with SFAS No. 109, “Accounting for Income Taxes,” due to the existence of various factors. Based on this reevaluation, the Company reduced the valuation allowance by $5,377,000 in 2007. The net deferred tax asset balance of $14,156,000 at June 27, 2009 represents the amount that management believes is more-likely-than-not to be realized and the remaining valuation allowance at June 27, 2009 is $1,680,000. Management will continue to assess the need for the remaining valuation allowance in future periods. Approximately $36,000,000 of income before income taxes is needed to fully realize the Company’s recorded net deferred tax asset and $41,000,000 of future taxable income is needed to fully realize the Company’s deferred tax assets. The difference between total deferred tax assets and the net operating loss carry forwards and credits is primarily book versus tax differences of various expenses. If the estimates and related assumptions relating to the likely utilization of the deferred tax asset change in the future, the valuation allowance may change accordingly.
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